Microsoft-Yahoo Merger Perfectly Timed For A Recession - InformationWeek
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2/27/2008
12:15 PM
Dave Methvin
Dave Methvin
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Microsoft-Yahoo Merger Perfectly Timed For A Recession

Although I still have a lot of doubt that Microsoft and Yahoo will ever consummate a marriage, Microsoft continues to pursue the deal with a lot of enthusiasm. I don't know how loudly I can say this, but Microsoft: It's a trap! There's a reason why some major Yahoo shareholders are suing to make this deal go through, pronto. They think you're crazy and they want to get the money before you sober up.

Although I still have a lot of doubt that Microsoft and Yahoo will ever consummate a marriage, Microsoft continues to pursue the deal with a lot of enthusiasm. I don't know how loudly I can say this, but Microsoft: It's a trap! There's a reason why some major Yahoo shareholders are suing to make this deal go through, pronto. They think you're crazy and they want to get the money before you sober up.Microsoft is saying it doesn't expect significant layoffs if the acquisition of Yahoo goes through. What? The two companies have dozens of offerings that overlap. Is Microsoft saying that it plans to leave the redundant services in place? That wouldn't make sense. If duplicate services are merged as they should be, is there really room for those people at Microsoft? Perhaps it's expecting many Yahoo employees to jump ship rather than walk the plank. Given the rumblings of Yahoo employees around the Internet, at least that part of Microsoft's strategy may be on target.

Then there is the tanking economy. ComScore just reported that Google's online ad revenue is falling. As businesses and consumers scale back their PC purchases, Microsoft's revenue from software licenses will drop as well. In a year, Microsoft will probably be looking at cost-cutting measures.

Given the source of ComScore data, I have some skepticism about its absolute accuracy. Still, it's hard to deny that the economy is headed in a nasty direction, and it seems logical that online advertising may take a hit. Google being the leader in that field, it would no doubt take the biggest financial hit. But MicroHoo won't be immune from a recession-fueled downturn either.

The past five years have provided a rising tide of online ad revenue that has lifted the Google boat a lot higher than Microsoft or Yahoo. If Microsoft and Yahoo couldn't succeed individually in a growing market, what scenario allows the combined MicroHoo to take Google market share away as it performs a painful business merger in a shrinking market?

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